SUPREME COURT NARROWLY DEFINES “WHISTLEBLOWER” FOR PURPOSES OF DODD-FRANK ACT

The Supreme Court has ruled in Digital Realty Trust, Inc. v. Somers that certain protections afforded to whistleblowers under the Dodd-Frank Act do not apply if the employee reports possible violations of the securities laws internally but not to the SEC. The Dodd-Frank Act prohibits employers from discharging, demoting, suspending, threatening, harassing, or discriminating against a “whistleblower” who engages in certain protected activity. 15 U.S.C. § 78u-6(h)(1)(A). The Dodd-Frank Act defines “whistleblower” as any individual who provides information relating to a violation of the securities laws to the SEC. Id. § 78u-6(a)(6). Inconsistently, however, one of the three enumerated protected activities in section 78u-6(h)(1)(A) is a catchall provision that protects individuals who make disclosures that are required or protected under certain laws, including the Sarbanes-Oxley Act, which itself covers reporting possible wrongdoing internally.

Somers was employed by Digital Realty Trust, and he alleged that Digital Realty Trust fired him shortly after he reported possible securities law violations to senior management. Somers did not, however, make any report to the SEC before he was terminated. Somers sued Digital Realty Trust alleging a whistleblower retaliation claim under the Dodd-Frank Act. The district court denied Digital Realty Trust’s motion to dismiss, in which it argued that Somers was not a whistleblower under the Dodd-Frank Act because he did not report any suspected securities laws violations to the SEC. The Ninth Circuit affirmed in an interlocutory appeal, and the Supreme Court granted certiorari to resolve a circuit split on the issue. See Asadi v. G.E. Energy (USA), L.L.C., 720 F.3d 620, 630 (5th Cir. 2013); Berman v. NEO@OGILVY LLC, 801 F.3d 145, 155 (2d Cir. 2013).

The Supreme Court reversed the Ninth Circuit, holding that the anti-retaliation provision in the Dodd-Frank Act does not extend to an individual who does not report the suspected securities law violations to the SEC. For the Supreme Court the question was fairly easy: “When a statute includes an explicit definition, we must follow that definition,” and this “resolves the question before us.” Somers, slip. op. at 9. The Supreme Court also explained that the Dodd-Frank Act has a separate provision that protects an employee providing information to the Consumer Financial Protection Bureau, or his or her employer, and courts presume Congress acts intentionally when it includes language in one section of a statute but omits it from another section. Regarding the alleged inconsistency concerning the third enumerated protected activity identified above, the Supreme Court explained that under its plain-text reading, the statute protects employees who report both internally and to the SEC, but are retaliated against solely because of the internal reporting. This protects employees who would otherwise not be protected under the first two enumerated provisions. Additionally, the Supreme Court’s ruling is consistent with the Dodd-Frank Act’s intended purpose of encouraging individuals to report possible securities violations to the SEC and its corresponding whistleblower bounty program.